Weyerhaeuser to buy rival, form timber REIT

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Weyerhaeuser Co. agreed to buy Plum Creek Timber Co. for about $8.4 billion to create a real estate investment trust that will be the largest private owner of timberland in the U.S.

Plum Creek stockholders will get 1.6 shares of Weyerhaeuser for each share they own, the companies said in a statement Sunday. The deal carries a 21 percent premium to Plum Creek’s closing price on Friday. Federal Way, Washington-based Weyerhaeuser plans a $2.5 billion stock buyback shortly after the completion of the deal, which is expected late in the first quarter of next year or early in the second quarter.

The new company will own more than 13 million acres of timberland across the U.S. and produce lumber and wood-fiber boards used in construction. The companies said the merger will save $100 million of costs each year. Weyerhaeuser CEO Doyle Simons will retain the title in the combined company while Plum Creek CEO Rick Holley will be non-executive chairman.

“We saw a unique opportunity to combine the two industry leaders,” Simons said in a telephone interview. Discussions had been going on for “some time,” he said, and “finally the stars aligned.”

The new combined company will have “a strong balance sheet, which is going to position us to continue to grow this company,” he said.

The deal increases Weyerhaeuser’s presence in the southern U.S. and looks like a good value for Plum Creek shareholders, Mark Wilde, analyst with BMO Capital Markets, said in a note Sunday. Accepting the deal “looks like an easy call” with the premium offered, he said in the note.

Weyerhaeuser’s lumber and wood products businesses are all tied to the housing cycle and any delay in recovery in single- family housing demand could worsen or strengthen the outlook, Mark Connelly, an analyst with CLSA Americas, said in a report Monday.

The acquisition of Seattle-based Plum Creek needs the approval of both companies’ shareholders. Weyerhaeuser expects to maintain the current dividend, representing a 13 percent increase to the payout now enjoyed by Plum Creek shareholders, the companies said.